How to Create Subscription Products That Drive Sales and Long-Term Retention

These days, there’s a subscription service for everything. You can subscribe to dog food deliveries, unlimited video streaming, and some vehicle manufacturers even offer car subscriptions! Gartner estimates that 75% of businesses will provide subscription services by 2023, but only 20% will succeed in increasing customer retention rates.

Subscription commitments are higher than any other type of product, which can make people nervous about signing up. Consumers aren’t just buying your product once; they’re committing to an ongoing relationship with your brand. To overcome this challenge, businesses need to take a different approach to marketing. Here are some tips to help you create successful subscription products that actually sell.

Consider What Subscription Products Will Work for Your Business

Not every product is suitable for subscriptions. Choosing the right subscription product that people will regularly need/want is the first step toward success. Here are a few qualities that make a good subscription product:

  • Evergreen products – Nobody wants to subscribe to a product that’ll be obsolete in a few months. Make sure the subscription product you wish to sell will be around—and usable—for the long haul. A subscription for medical masks won’t hold up after the COVID pandemic is over.
  • Memberships – Subscriptions needn’t be physical products. Consider how you can set up access to content or online services via memberships. For example, you could identify which website content assets are most commonly used by your customers, build out a “premium” series of these articles, and lock them behind a membership paywall. You can even apply this idea to physical products and offer ongoing product discounts for customers who pay a flat membership fee each month – perfect for customers who order often.
  • Continuous need – Items designed to last a lifetime or solve a problem after one purchase make terrible subscription products. It needs to be something that customers would buy repeatedly, even when it’s not offered as a subscription. Think items like razors, cosmetics, or cleaning supplies. If you’re on the B2B side, think about supplies, equipment, and parts that wear out over time.
  • Discovery potential – Many businesses have found subscription success sending boxes filled with small trial versions of their products. This is a great way to help consumers discover new items they might have never considered. This model works best for niches that have wide product varieties, like cosmetics, or diehard fans of niche products who enjoy recurring themed boxes.

If any of your existing products fit into one or more of these categories, it might be a good contender to be made into a subscription product. If it doesn’t, it might be best to leave it alone.

Key Takeaways:

  • Certain products in your product catalog will work better than others for selling in a subscription model.
  • Focus on products that generate recurring demand over time or require frequent replenishment.
  • Apply the knowledge you’ve gained from previous sales to figure out which products may be suitable for subscriptions.

Offer Discounted Annual Subscriptions

The goal of subscription commerce isn’t to get people to pay for your product; it’s to get them to KEEP paying. One of the most effective ways to decrease churn rate—the percentage of customers who cancel service within a time period—is to offer a discounted annual subscription in addition to the standard monthly subscription. By collecting the entire year’s payment up-front, you’ll increase your business’s cash flow and create a more stable and predictable revenue stream. You won’t have to worry about lost subscriptions hurting your bottom line.

Annual subscriptions can also decrease churn rate. Not only will customers be locked in for the full year, but they’ll also have more opportunities to learn about your product. If your products are technical or complicated, an annual subscription will give customers time to get past the learning curve. They won’t get frustrated and cancel their subscription after a month. Then, when the annual subscription comes around again, they’ll be pros and sign up for another year.

The difficult part is getting customers to choose paying a large lump sum instead of a small monthly payment. That’s where discounts come in. Offer customers a discount if they pay annually instead of monthly. For example, if your subscription is $20 per month, offer a $200 (or whatever works for your business) option for the year. They’ll save $40 on their annual subscription, and you’ll have 12 months of guaranteed customer retention. Win, win!

Key Takeaways:

  • Offer both monthly and annual subscriptions to give customers more purchasing options.
  • Annual memberships can decrease churn rate, increase cash flow, and improve customer retention.
  • Offer a discount on annual subscriptions to entice customers to take that option.

Bundle Products for Greater Impact

Bundling is a powerful B2B pricing management tactic that works for individual products as well as subscription products. Grouping similar products into a package adds perceived value and makes your subscription seem like a better deal.

There are four primary ways to bundle products in your commerce platform:

  1. Bundle multiple products – Add additional discounted products to your subscription. You can see this method in action on infomercials: “but wait, there’s more!”
  2. Bundle related products – Offer items related to the original product. For example, an OEM that sells car parts directly to dealerships or repair shops may bundle products that will inevitably be needed in the shop‘s operations — filters, sensors, tail light bulbs, and so on.
  3. Bundle a product with a future service – Add a warranty, free repairs, or some other product-related service to your subscription.
  4. Bundle with alternative products – Offer items unrelated to the original product but might still interest the customer. This is a good way to cross-sell and promote other products. For example, it’s becoming common for services like Hulu to team up with others (such as Spotify, Disney+, or ESPN+) and offer bundled subscriptions for all services. These partnerships can encourage customers to consider their needs in a different way and explore more services they might not have otherwise considered.

Product bundles increase your average order value. A customer might visit your site looking for one product and leave with more than they anticipated. And, since you’ll be selling more products, your bottom line will continue to grow.

Bundling is also a great way to cross-sell and show off your other products, which can lower your marketing costs. Instead of buying expensive advertisements to promote a specific product, bundle it with one of your more popular products. It’ll be seen, and purchased, by more customers without any additional marketing effort.

Key Takeaways:

  • There are four primary ways to bundle products: multiple products, related products, future services, and alternative products.
  • Bundling products adds perceived value to your subscription and can increase the average sale amount.
  • Promote and cross-sell specific products by bundling them with more popular products.

The Right Commerce Platform Makes Subscription Sales Easy

Of course, even if you find the perfect product, provide monthly and annual subscriptions, and offer fascinating bundles, your subscription product will fall flat if you don’t use a commerce platform that can handle the unique challenges of subscription selling.

Subscriptions are challenging for many traditional commerce platforms. They require recurring payments, front-end customizations, better customer communication, and unique reporting tools for long-term profitability. Many traditional commerce platforms need third-party extensions, add-ons, or customizations to handle these challenges, which can be expensive and may bog down system performance.

Choose a commerce platform that enables subscription commerce without needing third-party integrations. A more flexible commerce engine allows your subscription service to operate more smoothly, which will reduce headaches on your end and create a more positive user experience for your customers.

Plus, these platforms will come with tools that help you analyze your commerce metrics and determine which strategies work best within your subscription model. Headless APIs pull product and customer data from each website and storefront in your system and centralize it within the platform’s database. From there, it’s easy to see how each of your subscription options perform relative to one another and which could be improved — no matter how many storefronts you’re running.

Key Takeaways:

  • Subscriptions pose unique challenges that some traditional commerce platforms can’t handle.
  • Use a platform built to handle subscriptions without third-party integrations for a smoother process for both you and your customers. Remember that your customers are going to want to buy subscriptions and products/services through the same storefront — make it easy for them.
  • The right headless commerce platform will come with analytic assessment tools that pull product data via APIs and make it easy to measure subscription performance.

Get Started with Subscription Commerce

By switching to a commerce platform built to support subscriptions, like Ultra Commerce, you can avoid these headaches entirely. Contact the experts at Ultra Commerce Commerce to get an assessment of your existing or planned eCommerce features and be on your way to subscription product success.

Photo by Zachary Keimig on Unsplash.

To Learn More

Resource Center

Blog series
Post What’s Missing in B2B eCommerce – Quoting & Quote Management

A new blog series about the critical eCommerce capabilities missing in most eCommerce platforms for B2B companies. #1: Quoting & Sales Support

Headless commerce
Post Headless Commerce: An Ultra Commerce Definition, Use Cases and More

A closer look from the Ultra perspective on what we really mean when we talk about headless commerce and why it may not be right for every company.

Davis Case study
Case Study Davis Publications

Davis Art is now the only online K-12 publisher dedicated to the arts, creating top-notch curriculum and resources for art educators nationwide, all from the Ultra Commerce platform.